Most people who are struggling financially usually hope for a quick, straightforward assessment of what type of bankruptcy case they should file. It seems like if your income isn’t enough to pay your bills, you should file bankruptcy, but it isn’t always that simple. When you call us to talk about the financial problems you are having, we have to do a thorough examination of your finances before we can help you figure out the best plan of action to fix your current situation.
It’s like going to the doctor. Your physician always does what’s called a “history and physical” on you each time you go, no matter what’s wrong with you, where the doctor covers your past medical history, your temperature, your blood pressure, ask you what’s bothering you, and then he or she tells you what can be done.
When you call us to discuss filing for bankruptcy, we have to do a “history and physical” on your total financial picture. We have to go into detail about everything you own, everything you owe, and your total monthly household income. We ask you why you are thinking about filing for bankruptcy. We go through all the major assets you might have: real estate, houses, cars, stocks, bonds, bank accounts, life insurance. We then cover your total monthly household income: wages, salary, social security, pension income, child support, spousal support. And then we get down to your debts: credit cards, medical bills, back taxes, student loans, payday loans, car title loans, utility bills, court judgments – basically any amount of money you owe to anyone else for any reason whatsoever.
Once we get all that information on your assets, your income, and your debts, we have a much better picture on whether you should file for bankruptcy and what type of bankruptcy case you should file. Oftentimes, bankruptcy isn’t the answer. Because you can only file for Chapter 7 bankruptcy once every eight years, for example, we usually only recommend it if your unsecured debt equals at least half or more of your total yearly income. Unsecured debt includes credit cards, medical bills, payday loans, and utility bills.
So for example, say Mr. Smith has $20,000 in credit card debt and medical bills because he was out of work for six months after he got sick. Say his yearly income is $35,000. With the monthly expenses that he has for housing, food, clothing, gasoline, cell phone, internet, etc., there’s no way he can ever hope to repay $20,000 in debt based on his income. We would tell him to hire us to file a Chapter 7 bankruptcy case for him. But if Mr. Smith has $20,000 in unsecured debt and $80,000 per year in income, the situation is totally different. He would not file for a Chapter 7 bankruptcy but might benefit from filing a Chapter 13 – which is a repayment plan – or might not need to file at all. Learn more about the differences between Chapter 7 and Chapter 13 bankruptcy here.
If he had no income whatsoever, or just got $18,000 per year in social security, we’d advise him that he shouldn’t file at all because there’s nothing for his creditors to take from him even if they sue him.
The decision whether to file for bankruptcy is a complex one, like a doctor diagnosing a disease. Most people would never try and diagnose themselves to see if they had cancer or needed an operation. Your finances have to be treated the same way. A consultation with an experienced and knowledgeable bankruptcy attorney is the only safe way to go to protect yourself and your future.
We are happy to talk to you at any time at no charge to see whether bankruptcy makes the most sense for you. Thanks for considering Luftman, Heck & Associates to discuss your needs.